Citi is bearish on Brent prices and thinks the oil market is in the process of normalizing

We’re seeing a “supply cornucopia” at a time of heightened geopolitical tensions. The American energy revolution also heightens geopolitical tensions, since it reduces dependence on West Africa, Middle East, Venezuela, Mexico and oil prices decrease. OPEC and other oil producing countries will see their fiscal breakevens – price at which oil contributes to balancing budget – rise.

Copper prices are projected to decline as supply increases and demand slides

2013 is a “year of transition for copper” in terms of supply and demand. 2013 signals the next wave in terms of copper supply according to Citi analysts who think that mine supply growth will be up 6.7 percent.

On the demand side, China isn’t expected to have a major stimulus in early 2013, and with many markets in Europe expected to be in a recession, demand from the region is also expected to be weak.

Source: Citi

Nickel prices are expected to rise because supply is tighter than everyone thinks

Nickel suffers from a “reputational deficit amongst many in the analytical community” because of certain assumptions made about its over supply.

“In the short term, the combination of low consumer stainless inventories , particularly in Europe and China, and low nickel inventories with stainless mills, makes the nickel market is indeed increasingly vulnerable to a technical short covering rally perhaps prompted by index fund rebasing. However, unlike a similar rally in January 2012, it is likely that such a move in early 2013 is likely to spark consumer restocking, helping push prices towards $21,000/t during the first quarter.”

Source: Citi

Demand for zinc is expected to rise modestly pushing prices higher

The market faces weak fundamentals since LME inventory has jumped since the start of 2012. Demand for zinc is slowing especially viz-a-viz China but is expected to improve modestly in 2013. Mine supply is healthy

Source: Citi

Gold prices will rise in 2013, before declining again in 2014

Despite investors turning less bullish on gold, Citi continues to be bullish on gold. President Obama’s victory was expected to be positive for gold since it would benefit from “a continuation of dovish monetary policy”. Gold prices have also been supported by central bank gold purchases. Moreover muted gold demand in India is expected to have picked up during Diwali.

Source: Citi

Silver prices are projected to decline as it faces weak demand and increased production

In the near term, silver will see supply increase as production is boosted by projects like Pascua-Lama, Concheno and Pueblo Viejo, Saucito and Penasquito. But demand for silver is soft, especially silver jewelry demand. Industrial demand was also soft. Silver prices will likely enter a period of decline.

Source: Citi

Platinum prices will rise as the platinum market will face shortages stemming from strikes in South Africa

Palladium should also see support for prices because of stronger demand and weaker supply

South Africa accounts for 42 percent of global palladium mine supply, and 80 percent of global platinum supply, which explains why palladium prices got less of a boost from the wild cat strikes.

But Citi sees a deficit in the palladium market in 2013, because of increased demand given the recovery in auto markets, and decreased supply.

Source: Citi

Iron ore prices will continue to be volatile because of China’s restocking and destocking steel cycle

The Hindu

2012 average year price:$125.00/tonne

2013 average year price:$120.00/tonne

2014 average year price:$122.00/tonne

“Citi expects the closure of Chinese high-cost production to be the key defining price setting mechanism for iron ore in 2013. We maintain our 2013 forecast at $120/t based on our calculation that it will take 2-3 years to knock out high cost capacity in China.

However we expect increased volatility in iron ore pricing, with spot prices being set off the Chinese restocking and destocking steel cycle resulting in iron ore prices swing from the high cost domestic production (under a restock) to the marginal of new seaborne supply (destock).”

Source: Citi

Corn prices should stay high for the rest of the year and the first half of 2013, but record planting could see prices decline in 2014

Corn prices should stay high through the remainder of 2012 and the first half of 2013. Rebuilding corn stocks should benefit from weaker feed demand because of smaller populations of cattle and hogs following the drought across the U.S. this summer that led many farmers to reduce their livestock populations.

There should be record planting in 2013 and 2014, and if weather patterns return to normal the production should also reach record levels.

Source: Citi

Wheat prices are expected to rise in 2013 but weaken in 2014 because of disappointing production

“While the issues for the major row crops have been local and centered about the US farm-belt, the buoyancy of wheat is a global phenomenon driven by disappointing production outlook and export availabilities in the Black Sea, Australia, and Argentina.”

Source: Citi

Domestic soybean prices should pick up in the first half of 2013 because of improved soybean trade

Soybean prices have declined because of an improvement in production in the U.S. and because of record South American harvests.

But soybean trade is expected to pick up which should boost U.S. soybean prices during the first and second quarter of 2013 before international production hits the markets. And there also is some weather-related uncertainty about Latin America’s harvests that could boost supply.Source: Citi

The outlook for cotton is negative because of increased global production and soft demand

Citi continues to be bearish on cotton because of robust global production despite the drought in the U.S. and weak monsoons in India. Demand is taking a hit because of a lack of purchases as part of a Chinese reserve purchase program. Certified stocks are also expected to increase because of U.S. harvest.

Active Investor was produced by Postmedia's advertising department in collaboration with iShares by BlackRock to promote awareness of this topic for commercial purposes. Postmedia's editorial departments had no involvement in the creation of this content.

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